Putting a cloud in every office

German company Protonet was created out of a conviction that the Internet should be independent, belonging to the people who use it. But as well as appealing to Web revolutionaries, its personal servers have proved a hit with small and medium-sized enterprises.

The notion of starting a company that would bring some independence back to the Internet was prompted by the popularization of cloud computing and storage around 2006, and related industry and regulatory changes. “I had the feeling that the Internet was evolving into a very centralized and fragile structure, whereas it was supposed to be decentralized and resilient,” says Ali Jelveh, Protonet’s founder and CEO.

A child of Iran’s Islamic revolution who grew up in France and Germany, he admits to being sensitive to situations where power seems to be taken out of citizens’ hands. So he looked for something that would nudge things back the other way. The answer was infrastructure. “In the end, whoever controls the infrastructure controls who can talk to whom,” he says.

He started working on the idea for a simple wireless mesh network, an alternative way of connecting computers without cabling and without going through the Internet. “To be a viable alternative to what we have today this decentralized idea needs to be as easy to use as an iPhone. Turn it on and that’s it. Then you have applications, and it connects somehow, and it just works.”

This turned out to be a bigger project than anticipated, so Jelveh looked for another idea in the same vein that would have more immediate revenue-generating potential. So when Protonet launched in 2012 its business was to create simple, smart personal servers that would provide all the storage and networking potential an individual could need. In effect, a personal cloud.

This too looked like a challenge, but the technology was moving in Protonet’s favour. “Memory became so cheap that we, as a small team, could just focus on delivering the user experience,” Jelveh recalls.

As for the market, the interest from companies was unexpected, yet substantial enough to prompt a change in direction. “We pivoted away from personal and private users to small business users, where communication, storage and sharing things are problems that they want to solve.”

Businesses were particularly keen on the idea of a server that worked out of the box, without the need for configuration or constant costly systems support. Plus they could also keep control of their data. “A few years later that became a huge issue when the NSA scandal broke.”

Finance conversations did not always go smoothly in the early days, partly because of the concepts involved, partly because of the technological challenges. “It’s a risky businesses, and we didn’t have answers for all those risks.”

Hoping to find more sympathetic investors, Protonet turned to the relatively new method in 2012 of crowd-funding. “We had a feeling that people out there felt like us and had the same questions about the future of the Internet and what it should look like,” says Jelveh.

He was right. The initial round of crowd funding raised €200,000 in 48 minutes, a record at the time. Subsequent funding came from angel investors and an innovation grant from the City of Hamburg. Then the company returned to crowd funding in 2014, breaking further records by raising €3 million in five and a half days.

Last year the company had revenues of nearly €1 million, and Jelveh expects a multiple of that this year. “We could make a profit if we laid off half the staff, but we couldn’t really work on the next iterations as fast and as powerfully as we do now. So we are still burning more than we are earning.”

In addition to developing new products, the main business challenge is scaling up sales. The company needs to know more about its customers and why they are buying. “How do we reproduce that success, or grow it in a sector, or move it to another sector?” Jelveh asks. “That’s a lot of analytical footwork. I expected my company life to be full of visionary stuff, but at this point in the cycle this is a very analytical, process-oriented piece of work that stands before us.”

Simply growing is also a challenge. Just last year Protonet had 15 staff, now it has 45. “So how decisions are made, how we communicate in the company, all of these things have to be re-invented so that things work again.”